think about the last time you went to watch an IPL game ready in thatp SPAC a fun day for you and even more fun day for the owners of the IPL teams you are paying for the entertainment of seeing a professional like Virat kohle like Rohit Sharma like Ms donon and they earn a match fee for their Professional Service of being an athlete in this case a cricketer if you pause here for a second this sounds a lot less like sports and a lot more like business now you would be amazed to know that Chennai Super Kings as of last year 2024 was valued at approximately 8,000 CR rupees and the question here is how does an IPL team generate Revenue how does an IPL team have a valuation how is an IPL team profitable what are the cost heads for an IPL team so welcome to this week's breakdown where we're going to look at csk's financials to understand the business of sports franchise we'll take a minute to thank zeroa this channel breakdown is part of Zero's media Network and we extremely grateful to them for their support to allow us to bring this highquality research and production to you on the breakdown Channel once again thank you zeroda back to today's breakdown we'll start start by looking at the history of sports franchises now sports leagues are not unique to India globally similar to IPL there is a long list of sports leagues that have existed for 50 to even 100 Years starting from the English Premier League National Basketball Association NBA National Football League NFL Formula 1 and several other Global sports leagues sports teams and sports franchises can be some of the most incredibly lucrative assets out there let's look at some Global examples so Dallas Cowboys which is a team in the NFL was bought for $140 million in 1989 by Jerry Jones that is worth $1 billion today and closer to home IPL is slowly becoming the dominant Sports league in our country all the way back in 2008 India cements purchased the Chennai Super Kings franchise as part of the initial draw for about 364 CR rupees and as of 2024 exactly 16 years later that 364 CR investment is valued at about 8,000 CR rupees and that's 22x growth in the value over the course of 15 years and so far I've been telling you about teams of franchises the same way that a sports team can be bought and a sports team has a valuation the sports league as well can be purchased as per the last available research reports the IPL league as a whole was valued at about $1 13. 5 billion which is over 1 lakh CR rupes and a great example of this is Formula 1 so in 2017 Liberty Media acquired the Formula 1 company and the Formula 1 league for about $8 billion and formula 1's valuation in the last couple of years has surged to about $17 billion so just like a sports steam can be purchased and a sports team has a valuation a sports League like IPL like Formula 1 has a valuation and can be purchased or sold and this business of sports and sports franchises is not restricted to India it's Global and it's a real business I personally believe that the best way to understand a business is to look at its p&l statement understand what are the sources of revenue what are the cost heads and where does the profit land let's begin by looking at the sources of revenue for Chennai Super Kings there are three major sources of revenue for Chennai Super Kings the first is the BCCI Central rights the second is tickets and match day revenue and the third is sponsorship another observation that you will make by looking closely at the sources of revenue is that majority of the revenue comes from the media rights the quick question is how do these broadcasting rights work it's quite simple let's say BCCI makes a 100 rupees in this year from its broadcasting and media rights it keeps 50 rupees for itself to manage the cost of running the IPL and other BCCI operations from the remaining 50 rupees 45 rupees are distributed evenly amongst the teams and 5% is kept as a performance poool which gets distributed to performing teams this is the first time that IPL has split the rights into broadcasting for cable TV and broadcasting for media channels and OT as two separate rights deals the TV deal was done with Disney star and the digital deal was done with Viacom and this truly meant that there was more Revenue this time around to share with the IPL teams the next observation that you would make looking at the CSK sources of revenue is that there has been a sharp spike in ticketing and match day income but just pause here for a second don't get super excited remember that 2023 2024 which is the IPL season that took place in 2023 was the first IPL season after the covid break when it comes to sponsorships the reason for the jump in sponsorship Revenue comes from a three-year deal that CSK signed with TVs Euro grip which was approximately 1,000 CR rupees when you look at the sources of revenue for Chennai Super Kings the only message that I will send you is look for narrative and numbers now that you've understood the sources of revenue for Chen chai Super Kings let's look at the cost heads for an IPL team and when we look at the Chennai Super Kings FY 2324 cost bases you will observe that theyve spent about 144 CR rupees in player salaries and this is driven by a few Superstars Ben Strokes was taken on for 16. 25 CR rupees and Deepak chahar was retained for 14 CR rupees the next item in the cost headings for CSK is the central franchise rights now this Central franchise right is a mandatory contribution that some of the original IPL teams have to make and it's typically 20 is% of the total revenue generated by the sports team the next unsurprisingly is marketing and operations followed by travel and Logistics followed by a few other costs you can clearly see that the two biggest cost drivers here is player salaries and the franchising fee that is paid to BCCI now that you've understood the sources of revenue and the cost heads of Chennai Super Kings we can finally look at the profit that Chennai Super Kings has made broadly speaking in FY 24 which is the financial year ended 31st March 2024 Chennai Super Kings closed with about 230 CR rupees in net profit which is a 35% profit margin now this is almost Forex jump from the previous year but remember that the primary driver of this Forex profit jump comes from the fact that this is the year where the new media rights kicked in and therefore when new media rights kick in you would expect a sharp Revenue jump and therefore you would expect a sharp profit jump as well now that you've got a sense of the narrative and the numbers behind the business of Chennai Super Kings we can now think about some of the opportunities and for those of you who are always excited to understand price to earnings ratio market cap Etc broadly speaking Chennai Super Kings is currently valued at about 8,000 CR Rupees at approximately 200ish CR rupees of profit after tax it currently is available to investors at somewhere from 35 to 40 times your trailing earnings the share price has moved from 74 rupees in April 2021 to hitting an all-time high of 229 rupees in April 2022 and right now in March 2025 it is available at somewhere around 180 to 190 rupe again for those of you who are big fans of company analysis I think this breakdown of Chennai Super Kings is a great heads up as to why you should always combine narrative or business reality with numbers because if you looked only at the numbers you would have got extremely excited seeing a Forex growth in profit significant jump in Revenue but if you look at the narrative which is the business reality you would understand that the primary driver of Revenue here is media rights media rights grow in a step function only once every few years and this 2324 period is exactly where that step function growth in revenue and profit has come therefore it is extremely important as an investor to look at narrative Plus numbers we will now look at the big picture or the opportunity for Chennai Super Kings as a sports franchise or sports team and IPL as a leak as always we'll Begin by looking at the macro or the global context the simple answer answer is that sports franchises and sports leagues are still in the very early days or in their nent stage in India when we compare them to the global market IPL is at the cusp of overtaking the English Premier League but IPL teams themselves have a very long journey ahead of them to becoming enduring multi-generational sports franchises and the IP teams have a very long journey to Growing or beating the valuations of some of the NFL and NBA sports teams and to give you an idea of this we looked at some of the leading franchise values of teams and compared them against the franchise value of the league that the team is a part of so IPL was founded in 2008 and is valued at about $13.
5 billion Chennai Super Kings which we have covered in today's breakdown is valued at about $900 million to $1. 1 billion NBA which was started in 1946 is valued at $90 billion and the LA Lakers steam is valued at about $5. 9 billion NFL is valued at $180 billion it was started in 1920 and the Dallas Cowboys team which we discussed at the start of today's breakdown is valued at about $10 billion if I had to give you the simple message here there is still Headroom based on global peers for both Chennai Super Kings and other IPL sports teams and the IPL League itself to 10x in valuation over the next 10 to 25 years simple message very long Headroom to grow and lots of ways to increase the franchise value most investors would ask the question what does it take for Chennai Super Kings to grow from an 8,000 CR rupe valuation today to a 20,000 CR rup valuation in the future and those of you who have paid attention in today's breakdown would know that there are two ways for a sports team like Chennai Super Kings to grow its Revenue one way is by getting help from the league which is IPL to grow its revenue and the other way is figuring out ways by itself which is the team route to generate Revenue there are three ways that the league which is IPL can help a team like Chennai Super Kings grow its Revenue the first one is launching the Women's Premier League and in its first iteration itself the Women's Premier League is generating about 1,000 2 200 CR rupees in media rights over the years you should expect that wpl will grow further and similar to how IPL provides a media rights or broadcasting rights Revenue stream to CSK there will also be a generous Revenue stream from the wpl sports League the next one is international expansion and the IPL and BCCI have been working extensively on this front BCCI is looking to expand into markets like the USA with the major cricket league UAE South Africa and every time IPL expands to a new country where we have a large amount of Indians and a lot of love for Cricket there is an opportunity for CSK and its owners to buy the equivalent of a CSK sports team for that market and generate additional money through match day and sponsorships through ticketing revenue and through a share of media right the Third Way whereby the league which is IPL can grow revenue for Chennai Super Kings is by increasing the inventory of matches now that we've covered the three ways that the league which is IPL can help the team which is Chennai Super Kings grow its Revenue let's look at some of the ways whereby Chennai Super Kings can itself increase its Revenue one opportunity is to roll out subscription based membership programs now when you look at overseas sports franchises like Real Madrid which has its socios membership program that generates about $75 million a year year in pure high margin revenue for the Real Madrid sports team for those of you who are Chennai Super Kings fans I'd love to hear from you in the comments would you pay for a lifetime membership would you pay for an exclusive access pass another way for Chennai Super Kings to grow its revenue is by launching its own Cricket Academy which number one helps it to cultivate the next generation of talent who could become players for CSK but also provides a great source of revenue for Chennai Super Kings globally when we look at the Manchester United soccery and the nbais these Sports institutions can generate anywhere from 20 to 30 to $50 million of additional Revenue each year which is a few hundred CR rupees the Third Way is by investing in physical capex to build a worldclass stadium you may have heard of the $700 million deal that LA Lakers and crypto.
